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Overall, the EBA welcomes efforts made by banks to improve their disclosure practices and to comply with the new requirements introduced with CRD III. Nevertheless, the report notes that there is still room for improvements in Banks’ Pillar 3 disclosures, and the EBA intends to continue to press for such improvements.
Weaknesses remain in the areas of banks disclosures of credit risk – on Internal Ratings Based approaches (IRB) and securitisation activities – and market risk. The introduction of new disclosure requirements in CRD III in particular in the areas of securitisation and market risk may explain some of the weaknesses identified. But the EBA has also noted that weaknesses already identified in its previous assessments remain and calls for further action.
Beyond assessing compliance with CRD disclosures requirements, the EBA has also performed an analysis of banks’ Basel III implementation disclosures, in particular as regards the impact on own funds, and of the 2011 EBA Capital Exercise related disclosures. Information provided by credit institutions in these two areas were found to be of varying quality.
In all disclosure areas, the EBA has identified some best practices which credit institutions are encouraged to follow, in order to enhance the general quality of Pillar 3 information. With a view of both facilitating compliance with the requirements as well as enhancing the quality and comparability of disclosures, the EBA will this year supplement information on best practices with further explanations on the objective and content of the disclosure requirements, which banks are also encouraged to consider while preparing their Pillar 3 disclosures.
Some improvements in the quality of disclosures were noted in the area of remuneration and own funds. On the latter, credit institutions provided appropriate details of capital items and a meaningful breakdown of deductions.
With regards to the timing, formats or verification of disclosures, no significant changes have been made in banks’ practices of reporting Pillar 3 information. However, information was generally published nearer to the reporting date of banks’ annual accounts and annual report, but the EBA will still push for publication of these reports at the same time to allow investors to have the complete set of publicly available information at once.
Based on the findings and content of this report, the EBA, throughout 2012 and in 2013, plans to implement a strategy for enhanced transparency and to that end will
Follow-up review of banks‘ transparency in their 2011 Pillar 3 reports